Jury is out on Trump Administration flood insurance proposal

By Adam Wagner GateHouse Media

Monday

Mar 12, 2018 at 8:25 AMMar 12, 2018 at 1:14 PM

Idea would provide assistance for low income policyholders, while hiking rates on older homes.

As part of its proposed budget, the Trump Administration floated the idea of tweaking the struggling National Flood Insurance to benefit low-income policyholders, an idea that is being met with mixed reactions on the North Carolina coast.

The idea is buried deep in the Administration's 2019 budget proposal, which is widely viewed as a messaging document. Neither the federal Office of Management and Budget nor the Federal Emergency Management Agency (FEMA), which oversees flood insurance, responded to requests seeking detailed policy information.

In North Carolina, nearly 134,000 properties are insured through the NFIP with premiums averaging about $820. While enacting the proposal would benefit low-income policyholders, real estate agents worry it would result in rapid premium hikes on older homes, while environmentalists worry it might encourage property owners to build in risky areas.

The NFIP has been involved in many budget battles in recent months, and is currently operating under a short-term extension that expires March 23. Realtors and coastal governments have expressed concerns that the 90-day extensions leave the program operating in unstable fashion.

"In its current approach, NFIP makes rates 'reasonable' by offering discounts and cross-subsidies primarily based on a building's age, map changes at a building's location, or by considering mitigation activities undertaken by the property owner or community. This legislative proposal would end this practice and establish a targeted affordability program for NFIP policyholders," Taylor Oldroyd, the CEO of Cape Fear Realtors, wrote in an email.

A footnote in the Administration's budget said affordability assistance would increase government outlays to low-income policyholders while concurrently accelerating premium increases on policyholders who do not pay full-risk premiums. That typically means buildings constructed before 1975, or before initial flood insurance rate maps were adopted.

Such properties could, Oldroyd said, see annual increases of 15 percent to 25 percent if the plan moves forward, which he described as unfair.

"This is not something we would support. Flood insurance is important for all homeowners, especially in coastal communities," Oldroyd wrote. "While we recognize the need for improving the NFIP, any rate changes need to be phased in so that homeowners can adjust accordingly."

Environmental organizations such as the Natural Resources Defense Council (NRDC) have long advocated for an overhaul to the flood insurance program, largely by decreasing federal subsidies of premiums and buying out properties that have made repetitive claims.

Joel Scata, an attorney on the NRDC's water and climate team, said the affordability assistance would help offset some of the higher rates caused by reforms such as higher rates on older homes.

"That presents affordability problems for low-income homeowners," Scata said, later adding, "It is not the ultimate answer, I think, to solving the program's problems. There really needs to be a greater emphasis on risk avoidance and reduction."

Even if they receive affordability assistance, Scata said, homeowners should receive a document showing them what their base flood insurance premium would be without the aid.

Homeowners who receive subsidized rates now, he said, typically only see the insurance quote, not the true cost of their policy. The NRDC and other groups that study flood insurance sees that as important because flood insurance policies are one way officials measure risk.

"It has to be done in a way that a homeowner will understand what their true risk would be," Scata said, "and that's from understanding what their true insurance premium is."

Debbie Smith, the mayor of Ocean Isle Beach and a realtor, said the basic idea of affordability assistance would be helpful.

Smith has seen many homeowners maintain flood insurance until their mortgages are paid off and then allow it to expire because of the cost. An affordability assistance program might, she said, keep homeowners from taking that risk.

"Of course," she said, "the detail is in the plan, what is it going to do, and who qualifies and who doesn't."

Reporter Adam Wagner can be reached at 910-343-2389 or Adam.Wagner@GateHouseMedia.com.

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